Where an entrepreneur has a total annual net income not exceeding 35,000 Euro (30,000 Euro up until 31 December 2019) and the company is operated in Austria, an exemption from VAT applies (section 6 paragraph 1 (27) of the Umsatzsteuergesetz – UStG). This tax exemption is known as the "small company owner rule". If the regulation is applied, small company owners are not permitted to charge VAT and therefore are not required to pay VAT to the tax office. This is a non-genuine tax exemption, there is no input tax deduction.
Where the customers are exclusively end consumers and there are no appreciable taxes, the "small company owner rule" can prove to be advantageous, since the entrepreneur’s services are reduced in price on the market as a result (the total price does not include any VAT).
Determination of the total income
When determining the total income of 35,000 Euro, in addition to auxiliary transactions including the transfer of an entire business, transactions that are (non-genuinely) tax free in accordance with section 6 paragraph 1 (8d, j) and (9b, d) and (10) to (15) and (17) to (26) and (28) of the UStG 1994 are not to be included in the turnover limit. It is possible to exceed this limit by no more than 15 per cent within five calendar years as a one-off.
Where a small company owner discloses the VAT on an invoice separately, they must pay this tax amount to the tax office, provided that they do not adjust the invoice sent to the recipient of a service.
Option for tax liability
For small company owners, there is, however, the option of waiving the tax exemption. In this case, taxation is applied in accordance with the general principles (taxable turnover associated with the right to deduct tax in accordance with section 12 of the UStG). A waiver of this kind is advantageous where their own tax liability is less than the input tax to be charged, or, for maintaining the cost neutrality of the VAT, payments are primarily made to entrepreneurs who are entitled to deduct tax. Until the VAT assessment takes effect, a written declaration that the small company owner rule is being waived can be made to the tax office (section 6 paragraph 3 of the UStG). Although this declaration, which can be revoked, is binding for at least five years; during this time, input tax can, however, be deducted in respect of services received as an entrepreneur and/or imported goods.
Small company owners are only entitled to issue a VAT registration number where this is needed for business relationships with entrepreneurs in other EU countries and are able to request a VAT registration number for this purpose (Form U15).
- Umsatzsteuerrichtlinien 2000 – Kleinunternehmer
- Section 6 of the Umsatzsteuergesetz (UStG)
- Steuerreformgesetz 2020, BGBl I No 103/2019
- Jahressteuergesetz 2018 (JStG 2018), BGBl I No 62/2018, concerning amendment to article 3a paragraph 5 of the UStG ("electronic services")
Form "Tax exemption for small company owners – waiver – U12"German text to submit the waiver declaration
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